THE Pakistani rupee showed a mixed trend during the past week. While on the first day it fell modestly against the US dollar but managed to gain three paisa a day later in the open market. However, by the close of the week it had drifted lower shedding 15 paisa for buying and selling at Rs60.25 and Rs60.30, respectively.
On May 10, in the open market, the rupee dollar parity was at Rs60.10 and Rs60.15 for buying and selling respectively. It recovered three paisa on the following day at Rs60.07 and Rs60.12. But on May 12, it failed to retain its firmness against the US dollar, losing three paisa for buying and selling at Rs60.10 and Rs60.15, respectively.
The following day the rupee lost another 15 paisa in terms of dollar. Analysts attribute the rise of dollar to enhanced demand by the importers. Some say the dollar might rise to Rs62 in the open market before the Budget in mid-June.
In the New York market, the US dollar was steady earlier last week, and gained across the board on March 11, after a much narrower than expected US trade deficit tempered market concerns about external financing problems for the world’s largest economy.
On May 10, the euro was flat at $1.2843 as the dollar continued to benefit from the news that the US economy created 274,000 jobs in April. This fuelled expectations of continued dollar supportive interest rate hikes from the Federal Reserve. The dollar rose 0.6 per cent against the yen to 105.61 yen as China’s silence dampened speculation that Beijing might soon revalue its fixed currency.
The greenback fared better against sterling, however, with the pound losing ground across the board after weak UK retail sales data cast doubt on further UK rate hikes any time soon.
Late in New York, on May 11 the euro was trading at $1.2870, little changed from May 9. The dollar was down a touch against the yen at 105.59 yen and off about 0.1 per cent against the Swiss franc at 1.2015 francs.
The pound was down 0.2 per cent at $1.8820, pressured by a report that showed British retail sales fell at a record annual pace in April, which added to evidence of a slowing UK economy.
Analysts say a wide US trade gap is normally a bearish signal for the dollar because it highlights the amount of hard currency flowing out of the country to pay the country’s growing import bill. It also underscores the need for foreign capital inflows to plug that gap. Markets are expecting the US trade deficit to swell to a record $61.5 billion in March.
On May 11, the dollar gained after a much narrower than expected US trade deficit tempered market concerns about external financing problems for the world’s largest economy.
The deficit contracted to $54.99 billion in March from a revised $60.57 billion in February, well below economists’ median forecast for a $61.5 billion shortfall. Exports rose 1.5 per cent while imports dropped 2.5 per cent.
A wider-than-expected federal budget surplus for April also helped cement the market’s generally bullish dollar sentiment, which was briefly shaken by news that the White House and US Capitol were evacuated. A light aircraft had violated central Washington D.C. airspace but the “all clear” was given within minutes, and the dollar quickly recovered.
The dollar was also up around 0.4 per cent at 1.2058 Swiss francs, while sterling was down around 0.5 per cent at $1.8721. The dollar’s 0.2 per cent rise against the yen to 105.73 yen was limited by weakness in the euro/yen cross, which fell 0.4 per cent to 135.42 yen.
The dollar got off to a flying start in the US session after the trade data, which at first glance appears to ease fears the country’s financing needs which have weighted on the dollar for much of the past three years
Meanwhile, in the London market, the dollar showed a fluctuating trend. Earlier in the week the dollar last momentum, giving up earlier gains against the yen, euro and sterling. The rising US deficit has been a major factor behind the dollar’s decline over the past few years
On May 12, the dollar hit a three month high against the euro and approached 2005 highs extending gains made on May 11, trade data and ahead of expected strong retail sales data.
The dollar also cleared a two-week high against the yen, a one-month high against the Swiss franc and a 6-1/2 week high against sterling following news the US trade deficit had contracted to $54.99 billion in March, against expectations of a widening to a new record.
The dollar hit its highest level against the euro since February 10 at $1.2741, close to 2005 highs around $1.2730. It was trading at $1.2770 per euro at 1126-GMT, up nearly a third of a per cent from the US close.
The dollar rose to a two-week high of 106.32 yen, a one-month high against the Swiss franc of 1.2127 francs, and a 6-1/2 week high against the pound of $1.8633. It also hit a one-month high against an index of currencies at 85.30.
On May 12, in the New York market, the dollar rallied rising to a high for the year against the euro on a trade weighted basis, after a strong US retail sales report fuelled waves of buying.
The US retail sales in April surged 1.4 per cent on the month, up from March’s upwardly revised 0.4 per cent increase and overshooting expectations for a 0.7 per cent rise. This was the strongest showing in seven months, and core sales excluding autos were up a surprisingly strong 1.1 per cent.
Following data in the last week showing strong job creation in April, and a shrinking trade deficit in March, the retail sales figures further stocked the markets increasingly bullish sentiment toward the dollar and US economy.
At the end of New York trade, the euro was down at $1.2692 down about 0.9 per cent from late May 11. It fell as low as $1.2685, the lowest in six months. The dollar rose to 106.76 yen, up around 0.9 per cent on the day. After hitting a one-month peak against the Swiss franc at 1.2173 francs, the dollar settled around 1.2151 francs late in the day, still up around 0.7 per cent.
Sterling was off around 0.4 per cent at $1.8652. The euro’s fall below the low for the year around $1.2730 is being seen as a key technical development for the currency that suggests further weakness ahead.
In the London market, the dollar hit a seven month high against the euro and set three month peaks against the Swiss franc and sterling on May 13, after recent robust data raised optimism about the US economy.
The dollar hit its highest since mid-October at $1.2623 per euro. It rose a third of a per cent on the day to $1.2626 per euro bringing this year’s gain to more than six per cent. It hit highs of 1.2243 Swiss francs and $1.8552 per sterling. The greenback also pushed to 107.23 yen for the first time in almost a month.
THE Pakistani rupee showed a mixed trend during the past week. While on the first day it fell modestly against the US dollar but managed to gain three paisa a day later in the open market. However, by the close of the week it had drifted lower shedding 15 paisa for buying and selling at Rs60.25 and Rs60.30, respectively.
